portuguese market outlook up to 2040 - apren - home · highres,2040 6,5% 5,5% irr dry,2040 8,4%...

A report to APREN

POYRY

Portuguese Market Outlook up to 2040

The results and conclusions here presented are the outcome of an outsourced study

developed by Pöyry, with APREN’s guidance, but do not define a closed view of

APREN’s position on the future of the Iberian electricity system nor can they be

regarded as the only possible trajectory.

This study contains projections based on assumptions that are subject to

uncertainties and contingencies, hence these cannot be regarded as a firm

prediction of the future.

In the last months, some occurrences could influence the results here presented,

such as the sharp increase in CO2 prices, the increase in the wholesale electricity

market price, and also the complete nuclear power plants phase out until 2030,

recently announced by the Spanish government.

Disclaimer

✓ Identify the Iberian Electricity Market behaviour under a high variable

renewables penetration – solar and wind – and its interaction with the European

Market (horizon 2040);

✓ Compare the renewables remuneration effect between two different models:

one considering the pure spot market value and the other through competitive

ex-ante power/energy auction mechanisms;

✓ Identify the possible growth trajectory for wind and solar technologies, and its

ideal mix for both Portugal and the Iberian Peninsula;

✓ Analyse wind and solar “captured prices” within a pure spot market model;

✓ Understand the future role for storage and international interconnections.

Study’s objectives

Source: Pöyry Report to APREN

Model Used in the Study

Pöyry - BID3

BID3 – Pöyry’s Electricity Market Model


Modelling of Commodities and Electricity


Detailed renewable resource dataBID3 Coverage

Scenarios analysed

• Main scenarios:

1) “Business as Usual” (or BaU) Scenario

2) “High Renewable penetration” (or HighRES) Scenario

• Sensitivity cases over the HighRes scenario:

1) Dry year

2) Wet year

3) Increased Interconnection

4) Increased Commodity Prices

5) New pumped storage capacity in 2030

6) Increased Demand

Scenarios developed

“Business as Usual” - BaU Scenario

• Based on an energy framework in which the capacity investments are driven by the

market evolution;

• RES (Renewables) deployment relies solely on the merchant revenues to attract

investment;

• The risk exposure requires high IRR (Internal Rate of Return) values.

“High Renewable Energy penetration” - HighRES Scenario

• Based on an energy framework characterized by a growing share of RES;

• More ambitious (but still feasible) assumption on renewable CAPEX/MW reduction

combined with a change in the legal framework;

• The reduction of the investment uncertainty would allow the development of renewables’

projects with lower IRR.

Scenarios’ description

Data Inputs Assumptions

Portugal – DemandDemand profile is considered to be the same for

both scenarios

Model Inputs


• The demand (generation output to supply the final load) foreseen was 58 TWh and 62 TWh,

respectively for 2030 and 2040.

AAGR*2017-2040 = 1,01%

*AAGR: Average annual growth rate 2017-2040

Obs: The study carried out by UNL–CENSE for APREN in 2017 foreseen similar values: 2030 - 56 TWh and 2040 - 62TWh

Demand profile is considered to be the same for

both scenariosSPAIN - Demand

Model Inputs


• This study assumed a demand for 2030 of 316 TWh and an AAGR of 1,19%.

*AAGR: Average annual growth rate 2017-2040

Obs: More recently, the Spanish “Comisión de expertos de Transición Energética - Análisis y propuestas

para la descarbonización”, used a range between 285-320 TWh

AAGR*2017-2040= 1,19%

Solar PV CAPEX and OPEX [€/kW, real 2016 money]

BaU HighRES

Model Inputs


Onshore Wind CAPEX and OPEX [€/kW, real 2016 money]

Model Inputs

0

BaU HighRES


Commodity prices are considered to be the same

for both scenarios

Commodity Prices (real 2016 money)

Model Inputs

Com

mo

dity P

rice

(€

/MW

h)

Coal

2017

2020

2025

2030

2035

2040

Gas

2017

2020

2025

2030

2035

2040C

om

mo

dity P

rice

(€

/MW

h)

CO2

2017

2020

2025

2030

2035

2040

Co

mm

od

ity P

rice

(€

/to

n C

O2)


0

5

10

15

20

25

30

2017 2020 2022 2025 2028 2030 2035 2040

GW

Coal

Natural Gas

Nuclear

Year

Portugal Spain

Coal

[GW]

Natural

Gas [GW]Coal [GW]

Nuclear

[GW]

Natural

Gas [GW]

2017 1,76 3,83 9,20 7,12 24,57

2020 1,76 3,83 6,95 7,12 24,57

2025 1,18 2,84 5,20 7,12 24,57

2030 0,00 2,84 2,55 7,12 24,57

2035 0,00 2,84 1,11 7,12 24,57

2040 0,00 2,840,56 BaU

0 HighRES7,12 24,42

PT and ES – Assumptions for the decommissioning of thermal power capacity [GW]

Model Inputs

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

2017 2020 2022 2025 2028 2030 2035 2040

GW Coal

Natural Gas

Portugal Spain

• For Portugal the model considers the coal

decommissioning until 2028 and the reduction of

natural gas installed capacity by 1GW in 2022.

• In Spain the nuclear and natural gas power

capacities will remain constant, while the coal-

fired power capacity will progressively diminish

until 2040.

Thermal power plants decommissioning program is the same in both scenarios, except a small change for coal in

Spain in 2040


Model Results

The model calibration has been done by simulating one specific year (2014).

The results and its comparison with real values are presented in the figures below.

These figures show good accuracy between the model and the real values.

Backcast


Wind and Solar Generation (TWh)

Day-ahead price (€/MWh, nominal money) Interconnection flows (TWh)

Run of River Generation Curve (MWh)

PT Installed Capacity [GW]

Model Results

Model Results

ES Installed Capacity [GW]

(Low Sulphur Fuel Oil)

0

2

4

6

8

10

2017 2020 2022 2025 2028 2030 2035 2040

GW

BaU

HighRES

YearPortugal Spain

BaU HighRES BaU HighRES

2017 5,08 5,10 22,93 22,93

2020 5,31 5,28 23,08 23,13

2025 5,28 5,28 23,75 32,60

2030 6,09* 7,28* 27,25 36,66

2035 6,39 8,03 31,15 39,90

2040 6,68** 8,78** 35,25 41,58

PT and ES – Wind Installed Capacity [GW]

Model Results


Note:

*CENSE’s Study results for 2030: 7GW

**CENSE’s Study results for 2040: 7,50 GW

20

25

30

35

40

45

2017 2020 2022 2025 2028 2030 2035 2040

GW

BaU

HighRES

Portugal Spain

YearPortugal Spain

BaU HighRES BaU HighRES

2017 0,47 0,47 4,57 4,57

2020 0,55 0,55 8,57 8,57

2025 0,55 5,05 9,82 21,77

2030 1,85 9,05* 28,15 32,41

2035 6,70 11,80 28,15 40,81

2040 11,55 14,55** 36,75 49,07

PT and ES – Solar PV Installed Capacity [GW]

Model Results


Note:

*CENSE’s Study results for 2030: 3,5-4,5 GW

**CENSE’s Study results for 2040: 8-9,5 GW

0

2

4

6

8

10

12

14

16

2017 2020 2022 2025 2028 2030 2035 2040

GW

BaU

HighRES

0

10

20

30

40

50

60

2017 2020 2022 2025 2028 2030 2035 2040

GW

BaU

HighRES

Portugal Spain

PT - Generation by technology [TWh]

Model Results


ES - Generation by technology [TWh]

Model Results

(Low Sulphur Fuel Oil)

PT > ES interconnection flows [TWh]

Model Results

20212017 2018 2019 2020 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040


ES > FR interconnection flows [TWh]

Model Results

20212017 2018 2019 2020 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040


Model Results – Dry Year

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

[MW

]

Fossil Renewable Imports Consumption Pumping

August 2040 hourly production profile - HighRES Scenario

Source: Pöyry Report to APREN; APREN’s analysis

August 2040 hourly production profile and wholesale prices - HighRES Scenario

Model Results – Dry Year

0

10

20

30

40

50

60

70

80

90

100

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

[€/M

Wh

]

[MW

]

Fossil Renewable Imports Consumption Pumping Market Price


January 2040 hourly production profile - HighRES Scenario

Model Results – Wet Year

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

[MW

]

Fossil Renewable Imports Consumption Pumping


January 2040 hourly production profile and wholesale prices - HighRES Scenario

Model Results – Wet Year

0

20

40

60

80

100

120

140

160

180

200

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

[€/M

Wh

]

[MW

]

Fossil Renewable Imports Consumption Pumping Market Price


PT ES

Wholesale electricity price projections [€/MWh, real 2016 money] – PT vs ES

Model Results


0

10

20

30

40

50

60

2017 2021 2025 2029 2033 2037

Wh

ole

sale

Pri

ce (

€/M

Wh

)

BaU HighRES

2040

0

10

20

30

40

50

60

2017 2021 2025 2029 2033 2037W

ho

lesale

Pri

ce (

€/M

Wh

)

BaU HighRES

2040

0

10

20

30

40

50

60

2020 2025 2030 2035 2040

Cap

ture

dP

ric

e (

€/M

Wh

)

BaU HighRES

0

10

20

30

40

50

60

2020 2025 2030 2035 2040

Cap

ture

dP

ric

e (

€/M

Wh

)

BaU "HighRES"

Onshore Wind Solar PV

Solar PV and Onshore Wind captured prices [€/MWh, real 2016 money]

Model Results


Captured Price (€/MWh) = 𝐘𝐞𝐚𝐫𝐥𝐲 𝐭𝐨𝐭𝐚𝐥 𝐫𝐞𝐯𝐞𝐧𝐮𝐞𝐬

𝐘𝐞𝐚𝐫𝐥𝐲 𝐭𝐨𝐭𝐚𝐥 𝐠𝐞𝐧𝐞𝐫𝐚𝐭𝐢𝐨𝐧

Onshore Wind Solar PV

Captured Price (€/MWh) = 𝐘𝐞𝐚𝐫𝐥𝐲 𝐭𝐨𝐭𝐚𝐥 𝐫𝐞𝐯𝐞𝐧𝐮𝐞𝐬

𝐘𝐞𝐚𝐫𝐥𝐲 𝐭𝐨𝐭𝐚𝐥 𝐠𝐞𝐧𝐞𝐫𝐚𝐭𝐢𝐨𝐧

Solar PV and Onshore Wind captured prices [€/MWh, real 2016 money]

Model Results


40%

50%

60%

70%

80%

90%

100%

20

25

30

35

40

45

50

55

60

2020 2025 2030 2035 2040

Cap

ture

d R

ate

(%

)

Cap

ture

dP

ric

e (

€/M

Wh

)

BaU "HighRES" BaU % HighRES %

Captured Rate (%) = 𝐂𝐚𝐩𝐭𝐮𝐫𝐞𝐝 𝐏𝐫𝐢𝐜𝐞

𝐖𝐡𝐨𝐥𝐞𝐬𝐚𝐥𝐞 𝐏𝐫𝐢𝐜𝐞

Left axis Right axis (%) Left axis Right axis (%)

60%

65%

70%

75%

80%

85%

90%

95%

100%

20

25

30

35

40

45

50

55

60

2020 2025 2030 2035 2040

Cap

ture

d R

ate

(%

)

Cap

ture

d P

ric

e [

€/M

Wh

]

BaU HighRES BaU % HighRES %

PT - Curtailments by technology [GWh]

Model Results


ES - Curtailments by technology [GWh]

Model Results


CO2 emissions projections [million tones per year]

Model Results

20212017 2018 2019 2020 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040


IRR Projections

Model Results


Sensitivities over theHighRES Scenario

Results:

• The system would be adequate to

face these dry conditions keeping a

positive security margin

• As this sensitivity scenario has higher

wholesale prices, IRR would tend to

increase

Onshore

Wind

Solar

PV

IRRHighRES,2040 6,5% 5,5%

IRRDry,2040 8,4% 7,2%

Dry year

Sensitivities over the HighRES Scenario

ASSUMPTION: HYDRO PATTERN OF 2012, WITH A HYDRO GENERATION OF 44% LOWER THAN THE AVERAGE

FOR THE PERIOD 2008-2017


Results:

• The hydro resource availability growth

will induce around 40% more

curtailments in 2040;

• As this sensitivity scenario has lower

wholesale prices, IRR would tend to

decrease

Onshore

Wind

Solar

PV

IRRHighRES, 2040 6,5% 5,5%

IRRWet, 2040 2,0% 2,9%

Wet year


ASSUMPTION: HYDRO PATTERN OF 2013, WITH A HYDRO GENERATION OF 27% HIGHER THAN THE AVERAGE

FOR THE PERIOD 2008-2017


Increased Interconnection (ICXSens)


Results:

• This would reduce curtailments by 16%

in 2030 and by 26% in 2040

• The difference in wholesale PV and

Onshore Wind captured prices would not

be significant

Onshore

Wind

Solar

PV

IRRHighRES, 2040 6,5% 5,5%

IRRICXSens 2040 7,1% 6,4%

ASSUMPTION

2017 2020 2025 2030 2035 2040

Wind

HighRES Wind

ICXSens

Solar PV

HighRES

0

2

4

6

8

10

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

203

1

203

2

203

3

203

4

203

5

203

6

203

7

203

8

203

9

204

0

[GW

]

ES-FR Interconnection

0

2

4

6

8

10

201

7

201

8

201

9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

203

1

203

2

203

3

203

4

203

5

203

6

203

7

203

8

203

9

204

0

[GW

]

PT-ES Interconnection

ICXSens

HighRESICXSens

HighRES

2017 2020 2025 2030 2035 20402017 2020 2025 2030 2035 2040 2017 2020 2025


Results:

• This commodity price increase

would lead to a wholesale price

growth of around 15%;

• The results on CO2 emissions

and curtailments are not too

different from the HighRES

scenario

Increased Commodity prices


ASSUMPTIONS: 20% INCREASE ON GAS, COAL AND CO2 PRICE FROM 2017 ONWARDS


Results:

• Wholesale price would be 0,2€/MWh higher

• This would result in a decrease in curtailed energy of 277 GWh due to the new storage

capacity introduced

New pumped storage capacity in 2030 (PumpSens)


ASSUMPTION: INSTALLATION OF A PUMPED STORAGE PLANT OF 1000 MW IN 2030

2017 2020 2025 2030 2035 2040

Wind

HighRES Wind

PumpSens

Solar PV

HighRES


Results:

• This sensitivity would result in

higher wholesale and captured

prices

• This would also result in a

decrease of approx. 35% (431

GWh) in curtailments for 2040

Onshore

Wind

Solar

PV

IRR HighRES, 2040 6,5% 5,5%

IRR Increased demand 8,2% 7,2%

Increased demand case


ASSUMPTIONS: USE OF A GREATER DEMAND GROWTH RATE IN THE DECADE 2030-2040 OF 1,6% PER

YEAR REACHING 68TWh IN 2040 (AN ABSOLUTE 10% DEMAND INCREASE IN 2040)

Increased demand


Summary of the applied sensitivities


Faster demand

increase after 2030,

reaching more

6TWh in 2040

Increased demand

growth rate


✓ The main investment difficulties for renewable technologies do not essentially

result from technical or economic aspects, but from Market design;

✓ Marginal markets are increasingly volatile, thus failing to ensure the

necessary predictability and stability to provide the appropriate investment

signals, for both renewables and power/energy capacity reserve systems;

✓ Nowadays renewables are already competitive when compared with the

marginal cost for fossil fuels and, even with a low CO2 price, they will be the

most cost-effective trajectory for the system’s development;

Main results and messages (1/2)


✓ Renewables do not need subsidies, but competitive market and price

stabilization mechanisms are necessary to foster a lower capital cost,

therefore reducing the system’s overall expenditures;

✓ It is necessary to create mechanisms for the regulation and

encouragement of power plants capable of providing firm capacity to the

System services, mainly for technologies that provide flexibility and storage to

the system;

✓ Market aggregators must provide System services (active consumer

behavior, EV’s smart charging, distributed storage), resulting in a smart demand

side reaction to the resource availability and/or to the market price dynamics.

Main results and messages (2/2)


Thank you!

For more information go to: www.apren.pt

Or send us an e-mail: [email protected]

http://www.apren.pt/

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portuguese market outlook up to 2040 - apren - home · highres,2040 6,5% 5,5% irr dry,2040 8,4%...

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